Pavers & Road Builders District Council Welfare Fund v. Core Contracting of N.Y., LLC
536 B.R. 48
E.D.N.Y2015Background
- Plaintiffs are an ERISA pension fund's administrators and the Union seeking unpaid pension contributions from four corporate defendants.
- All four defendants are alleged signatories (or a former signatory) to collective bargaining agreements obligating pension contributions.
- Defendants assert they are alter egos of one another; one defendant (Canal Asphalt, Inc.) filed Chapter 11 in SDNY.
- Defendants contend the Chapter 11 automatic stay halts this litigation as to all defendants because of the alter-ego allegations.
- The court observed that the automatic stay by its terms protects only the debtor and therefore continued the action against non-debtor defendants absent a bankruptcy court order extending the stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 362(a)(1) automatic stay apply to non-debtors alleged to be alter egos of a debtor? | The automatic stay should not bar litigation against non-debtors; Plaintiffs seek to proceed against non-debtors on contractual and other claims. | Alter-ego allegations mean the stay applies to non-debtors; cites In re Adler as supporting authority. | The stay does not automatically protect non-debtors. Alter-ego status does not convert non-debtors into debtors; bankruptcy court may extend stay by injunction but only after case-specific findings. |
| If an action against non-debtors proceeds pre- or post-petition, can a later determination of alter-ego status void that litigation? | Plaintiffs rely on the state court’s ability to decide scope of stay and to proceed absent a bankruptcy injunction. | Defendants argue later bankruptcy findings (as in Adler) can render prior non-debtor proceedings void. | Court rejects retroactive application; allowing state courts to decide stay issues is proper. A bankruptcy court may later enjoin or vacate actions, but non-bankruptcy courts need not preemptively extend stay without bankruptcy findings. |
Key Cases Cited
- In re Adler, 494 B.R. 43 (Bankr. E.D.N.Y. 2013) (bankruptcy court applied alter-ego reasoning to extend stay and invalidate post-petition state-court judgment)
- Queenie, Ltd. v. Nygard Int'l, 321 F.3d 282 (2d Cir. 2003) (assumed stay could apply to wholly owned corporation because adjudication would immediately harm debtor)
- In re Baldwin United Corp. Litig., 765 F.2d 343 (2d Cir. 1985) (non-bankruptcy courts have concurrent jurisdiction to determine scope of the automatic stay)
- In re Colasuonno, 697 F.3d 164 (2d Cir. 2012) (discusses jurisdictional and stay-related principles in bankruptcy context)
- In re United Health Care Org., 210 B.R. 228 (S.D.N.Y. 1997) (bankruptcy court may protect non-debtors via § 105 injunction or plan provisions)